Q1 2025 Xcel Brands Inc Earnings Call
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Ladies and gentlemen, thank you for patiently waiting welcome through the actual branch Gil for 'twenty 'twenty, four and Q1 'twenty earnings Conference call. All lines have been placed on mute to prevent any background noise out there in the speaker's remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one.
<unk> on your telephone keypad.
If you would like the winter I got question Rustler, one again, thank you I.
Seth Burroughs: I would now turn the call over to Seth Burroughs EVP that you may begin.
Speaker Change: Good afternoon, everyone and thank you for joining US welcome to XL brands combined fourth quarter of 2024, and first quarter of 2025 earnings call. We greatly appreciate your participation and interest with us on the call today are chairman and Chief Executive Officer, Robert to learn and Chief Financial Officer, Jim Haran.
By now everyone should have access to the earnings releases for the quarter and fiscal year ended December 31, 2024, and the quarter ended March 31, 2025, which went out last Wednesday and yesterday, respectively.
Seth Burroughs: In addition, the company filed with the Securities and Exchange Commission with its annual report on Form 10-K last Wednesday, and we will file our quarterly report on Form 10-Q for the quarter ended March 31, 2025 tomorrow.
Seth Burroughs: Releases, the annual report and the quarterly report will be available on the Companys website at Www Dot XL brands Dot com.
Seth Burroughs: This call is being webcast and a replay will be available on the company's investor Relations website.
Before we begin please keep in mind that this call will contain forward looking statements.
All forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from certain expectations discussed here today.
Seth Burroughs: These risk factors are explained in detail in the company's most recent annual reports filed with SEC.
Does not undertake any obligation to publicly update or revise any forward looking statements, whether as a result of new information future events or otherwise.
Seth Burroughs: Dynamic nature of the current macroeconomic environment means that what is said on this call could change materially at any time.
Seth Burroughs: Finally, please note that on today's call management will refer to certain non-GAAP financial measures, including non-GAAP net income non-GAAP diluted EPS and adjusted EBITDA.
Management uses these non-GAAP metrics as measures of operating performance to assist in comparing performance from period to period on a consistent basis and to identify business trends related to our companys results of operations.
Our management believes these financial performance measurements are also useful because these measures adjust for certain costs and other events that management believes are not representative of our core business results and thus they provide supplemental information to assist investors in evaluating the company's financial results. These non-GAAP measures.
Should not be considered in isolation or as alternatives to net income earnings per share or any other measure of financial performance calculated and presented in accordance with GAAP.
You may refer to the attached to the Companys earnings releases, where the Form 10-K, and 10-Q for a reconciliation of non-GAAP measures.
Robert: Now I'm pleased to introduce Robert <unk>, Chairman and Chief Executive Officer, Bob. Please go ahead.
Robert: Thank you good afternoon, everyone and thank you for joining us today.
Robert: I'd like to start today's call with a brief update on our performance over the two most recent quarters and our outlook for 2025 and beyond after that our CFO, Jim Haran will discuss our financial results in more detail, but first I am happy to report that we have closed a strategic transaction.
Robert: <unk> with United and trademark group in April this transaction brings together two industry leaders and brand management supply chain management licensing and video and social commerce to create a global powerhouse.
Robert: <unk> significantly enhances <unk>.
Robert: <unk> goal of achieving global distribution of our existing and new creator driven brands and our ability to deliver great products with a high quality to value ratio across multiple product categories.
<unk> supply chain capabilities. The initial transaction provided the company with $3 million.
Robert: Liquidity and saves us over $1 million per year in interest and principal payments through March of 2027.
Robert: No.
Robert: <unk> puts us in a great position to more aggressively pursue acquisitions some of which may be transformative to the company. We have been working hard and fast with UGG to preserve the strength of the combined platforms to retailers across multiple channels of distribution and conducting due diligence.
Robert: Potential acquisitions also we believe that this partnership will accelerate our formation of additional creator Influencer brands on our platform. We continue to work hard with all of our production partners to drive our business.
Robert: Our new creator Influencer brands with season, Milan, Jama, Stafford and Jenny Martinez and Q2 of 2025, we have identified key category license opportunities for all of these new creator Influencer brands.
Robert: Social media reach across our brand portfolio has grown from 5 million followers in January of 2025.
Robert: $45 million to date, we believe this is an extremely important and valuable media currency going forward given the recent dramatic growth in video Commerce and creator led brand.
Robert: I Wonder in Christie, Bryan frankly remain the two fastest growing brands on HSN.
Robert: Have a strong pipeline of additional new creator Influencer brands that we hope to announce in the near future. All of that said, we are approaching Q3 and Q4 of this year with caution given the impacts of the tariffs on QVC and HSN business, and our licensees, including G. III.
Robert: For our Halston brand and the.
Robert: Coming consolidation of Hsn's operations into Qvc's headquarters in Pennsylvania.
Robert: <unk> continues to operate on planet J TV in fact, our most recent on air rotation was most was our most successful to date, our Longaberger brand launches on QVC. This fall.
Robert: Army team has on boarded 25 premium beauty brands as it focuses its efforts on the beauty category user downloads have reached 50 and.
Robert: In the Influencer base now reaches over 10 million followers. As previously mentioned this is a joint venture with a technology company in which <unk> owns a 19% interest in this new marketplace.
Robert: We believe that our goal of building a portfolio of creator Influencer brands that reaches 100 million followers.
Robert: So to accelerate the growth of more than me.
Robert: We generated an adjusted EBITDA loss of $792000 in Q4 that is.
Robert: A $361000 improvement over Q4 of 23.
Robert: Note that in the 2020 for a loss is approximately 150000 more than we expected which was caused by the impacts of the Florida Hurricanes in Q4 of 2024.
Robert: While we forecast.
Robert: A range of one to $2 5 million of adjusted EBITDA for 2025 much of it was weighted on the results of the back half of this year.
Robert: We're assessing the impact of the tariffs and the HSN Tampa studio closure on our businesses and working on potential solutions, including short term domestic production for some of our brands.
Robert: Jim will more fully cover June four 2024, and the full year of 24 results and Q1 dollars $25 Us Jim.
Robert: Thanks, Bob and good afternoon, everyone I will now briefly discuss our financial results for the quarter and fiscal year ended December 31.
Robert: 2024, and the quarter ended March 31 2025.
Robert: Total revenues were $1 2 million for the fourth quarter of 2024, and $8 3 million for the full fiscal year.
Robert: For both the quarter and full fiscal year periods. Our revenues were roughly half of what was reported in the prior year comparable periods due to the sale of Lori Goldstein brand in the second quarter of 2024, and the exit from all wholesale operating businesses as part of our project fundamentals that began in 2000.
Robert: <unk> 23.
Robert: Total revenues for the first quarter of 2025 or $1 3 million up slightly from the fourth quarter.
Robert: As we restructured and transformed our business operating model over the past two years, starting in 2023 and continuing through 2024, we have taken numerous actions to reduce our payroll operating and overhead costs as a result, our direct operating cost and expense.
Robert: <unk> decreased by nearly 50% year over year from fiscal year 2023 to fiscal year 2024, and similarly from the fourth quarter of 2023 for the fourth quarter of 2020.
Robert: Management has continued to implement additional cost cutting measures throughout the first quarter of 2025 to further optimize the company's cost structure and as a result, our direct operating expenses for the first quarter were approximately $2 3 million, which was approximately 40% lower than the prior year period.
Robert: As of the end of the first quarter, we have reduced our operating cost to a run rate of approximately $9 million on.
Robert: On a go forward basis.
Robert: Looking at our other operating costs and expenses, which are predominantly noncash in nature.
Robert: Depreciation and amortization expense has declined significantly year over year for both the fourth quarter of 2020 for the full fiscal year 2024, and the first quarter of 2025, who are primarily as a result of the sale to Lori Goldstein brand.
Robert: During fiscal 2024 and to a lesser extent in Q1 2025, we recognize some significant charges related to our equity method investments, including one 9 million through our proportional share of losses of $10 million.
Robert: Other charges related to the valuation.
Speaker Change: And I am Costco, and our contingent contractual obligations to transfer a portion of their equity ownership interest in <unk>.
Robert: Similar charges for the current quarter were approximately <unk> 3 million.
Robert: And I would like to reiterate that these charges are noncash in nature and excluded from our non-GAAP measures of performance.
Robert: Further with the subsequent resolution of the contractual obligations related to the R&M topical in April of 2025, the resulting reduction of our ownership interest in <unk> from 30% to 17, 5% and the implications under applicable accounting rules.
Robert: Overall, we had a net loss for the first quarter of 2024 or approximately $7 1 million minus $3 per share on a GAAP basis, and $1 6 million and minus 69 per share on a non-GAAP basis. This represents a 53% improvement over last year.
Robert: Fourth quarter, adjusted EBITDA was negative $2 8 million and also a 31% improvement over last year.
Robert: For the full fiscal year 2024, we had a net loss of approximately $22 4 million or $9 84 per share on a GAAP basis.
Robert: Although this does include $16 $5 million of various noncash charges as mentioned earlier.
Robert: On a non-GAAP basis, we had a net loss of $5 1 million or minus $2 23 per share, which represents a 58% improvement over 2023.
Robert: Our fiscal year 2020.
Robert: EBITDA was negative $3 5, million% to 40% improvement over the prior fiscal year.
Robert: For the current quarter, we had a net loss of approximately $2 8 million or minus $1 18 per share compared with a loss of $6 3 million or minus $3 <unk>.
Robert: In the prior year quarter.
Robert: On a non-GAAP basis, our first quarter net loss was $1 4 million or minus 58 per share compared with $1 8 million loss were minus <unk> 88 per share in the prior year quarter.
Robert: This represents a 56% improvement on it.
Robert: GAAP basis, and a 24% improvement on a non-GAAP basis.
Robert: Our adjusted EBITDA was negative <unk> 7 million or 56% improvement over the negative $1 6 million.
Robert: In the prior year quarter.
Robert: These bottom line results exhibit significant strides we have taken in right sizing, our business and cost structure and moving towards profitability.
Robert: And once again as a reminder, our earnings press release and Form 10-K, and Form 10-Q present, a full reconciliation of our non-GAAP measures with the most directly comparable GAAP measures.
Robert: Turning now to our balance sheet and our liquidity.
Robert: I was just March 31, 2025, the company's balance sheet reflected stockholders' equity of approximately $26 million and unrestricted cash of approximately <unk> 3 million.
Robert: It also reflected $8 7 million of long term debt of which the first payment of 250000 is due on March 31 2026.
Robert: Yeah.
Robert: In April 2025, refinanced our term debt, resulting in a net increase of approximately $3 million and the company's liquidity and working capital.
Robert: Currently our term debt is $13 6 million and we do not have any principal repayments under the amended term loan until March 31 2026.
Robert: Yes.
Robert: And so the majority of the term loan approximately $9 $1 million. The interest will be paid in kind, meaning that it will accrue and not required cash payments until 2027.
Speaker Change: And with that I would like to turn the call back over to Bob Bob.
Speaker Change: Thank you Jim This concludes our prepared remarks operator.
Speaker Change: At this time I would like to remind everyone in order to ask a question and depressed our followed by the number one on your telephone keypad and if you would like to withdraw your question Press Star one again.
Speaker Change: And your first question comes from the line of Michael Kopinski with Noble capital markets. Michael. Please go ahead.
Michael Kopinski: Thank you and thanks for taking my questions I just have a couple first of all I just had a couple of clarifications. Robert you indicated that you thought.
Speaker Change: <unk> EBITDA for full year 2025 would be one to maybe $2 5 million did I get that right and is that does that include the impact of tariffs or not.
Speaker Change: So it includes.
Speaker Change: The potential impact from tariffs.
Speaker Change: And also.
Speaker Change: Any disruption that may occur with the move of HSN from Tampa.
Michael Kopinski: Westchester PAA Michael.
Speaker Change: We just don't know we don't have enough visibility to know if there.
Speaker Change: That move will disrupt the business.
Speaker Change: And cause disruptions in airtime, which would push sale.
Speaker Change: Products potentially.
Speaker Change: Next year.
Speaker Change: And of course.
Speaker Change: We just don't know yet what the potential impacts from tariffs would be we've been working very hard.
Speaker Change: On mitigating measures, including.
Speaker Change: Entering into it.
Speaker Change: Short term license with you.
Speaker Change: A group that can produce our apparel domestically.
Speaker Change: To provide.
Speaker Change: Products, if we need them.
Speaker Change: Got you.
Speaker Change: And then Jim you indicated that the run rate of $1 million I assume thats per month.
Speaker Change: Is that correct.
Speaker Change: Yes.
Speaker Change: Are you talking about run rate of our overhead because I think.
Speaker Change: You mentioned.
Speaker Change: It would be around at all I'm, just going to be one.
Speaker Change: Adam.
Speaker Change: So it would be less than $200 million per quarter.
Speaker Change: We'd be our overhead gotcha.
Speaker Change: So thats about $9 million for the year.
Speaker Change: Okay, and then can you remind us what are the guarantees from G. III halston and when did those royalties revenue start to kick in I believe at Halston was featured a neiman Marcus and Saks for the spring.
Speaker Change: But I was just wondering so that royalty revenue start kicking in in Q2, and maybe if you can kind of give us some thoughts about how Q2 shaping up in terms of revenue.
Speaker Change: Sure.
Speaker Change: Guaranteed minimum under the license is one 7 million per year.
Speaker Change: And we we.
Speaker Change: Planned the business on the minimum.
Speaker Change: With very little pickup.
Speaker Change: Actual over the minimums in Q2, so the minimums Q1, a little bit of pickup in Q2, and then as they shift for fall.
Speaker Change: We anticipated.
Speaker Change: David would come in over the minimums.
Speaker Change: Okay Gotcha.
Speaker Change: Then.
Speaker Change: I was just wondering if you could talk a little bit about liquidity I know that you've got you brought in another $3 million of liquidity.
Speaker Change: In this quarter.
Speaker Change: But you also have some needs I guess in terms of the launch some recently announced brands that you plan to introduce this year and into 2026 I was just wondering if you can just talk a little bit about.
Speaker Change: Your liquidity needs going into this year and.
Speaker Change: The $3 million of liquidity enough to kind of get you through to 2026 in your other product launches or how do you. How do you look at sort of liquidity at this point.
Speaker Change: So.
Speaker Change: Our liquidity is good.
Speaker Change: Now we.
Speaker Change: We do have more transactions in the pipeline.
Speaker Change: And we've issued the LOI.
Speaker Change: Yes.
Speaker Change: John.
Speaker Change: Additional.
Speaker Change: Transactions that are beyond what I would call pipeline pipeline is something where we've signed an LOI. We are addressing licenses that we have.
Speaker Change: And the pipeline.
Speaker Change: If we see that we're going to have additional.
Speaker Change: Need for capital, we will address it.
Speaker Change: When that time comes but at the moment.
Speaker Change: Believe we're okay.
Speaker Change: Gotcha and then.
Speaker Change: While all of your recent planned brand launches appear extremely compelling and I'm sure that some of them offer more revenue and cash flow potential than others.
Speaker Change: Just given the specific market.
Speaker Change: <unk> markets and so forth I was wondering maybe if you can score for us some of your thoughts on the revenue potential of your recently launched or anticipated launch brands.
Speaker Change: Really excited about the season Milan pet.
Speaker Change: Products, but I'd like to hear your thoughts on what are the prospects of some of the recently launched brands.
Speaker Change: So.
Speaker Change: All of them are.
Speaker Change: Very exciting to us Michael Cesar its course.
Speaker Change: By far the.
Speaker Change: The biggest voice and the Pep World and.
Speaker Change: We anticipate that that business will be.
Speaker Change: Stronger than we initially thought just based upon the feedback we're getting from potential licensees.
Speaker Change: And hopefully we'll start to see some income.
Speaker Change: From from the <unk> program this year and then.
Speaker Change: It really picked up going into next year, we also.
Speaker Change: Believe that Jama Stafford.
Speaker Change: Besides.
Speaker Change: Her launching QVC, which we anticipate will happen.
Speaker Change: Late this year.
Speaker Change: We see a lot of opportunities for her.
Speaker Change: In bricks and mortar retail and e-commerce with fluid products kitchen, and taking gadget.
Seth Burroughs: Similarly for Jenny Martinez.
Seth Burroughs: We're excited about all three of them.
Seth Burroughs: Between the three of them.
Seth Burroughs: Reach over 30 million social media followers.
Seth Burroughs: And we do believe that Influencer brands.
Seth Burroughs: Are the new currency and media.
Seth Burroughs: When those brands.
Seth Burroughs: We have credible voices in that category as opposed to say a pop star.
Seth Burroughs: That wants to get into a particular category.
Seth Burroughs: We will continue to do deals like this going forward.
Seth Burroughs: And in terms of the Isaac Mizrahi brand given the number of brand initiatives that you have in that seemingly offers significant growth prospects is there a reason that the company would want to own a minority interest in this brand.
Seth Burroughs: Considering monetizing this interest on just your thoughts.
Seth Burroughs: Yeah.
Seth Burroughs: Isaac.
Speaker Change: He has been a brand that has been great for us over the years.
Speaker Change: A tremendous 14 year run with Isaac we will continue to support the brand in any way that we can.
Speaker Change: We currently oversee the QVC business, we are not really involved in the third party licensing that's handled by WH fee partners.
Speaker Change: And.
Speaker Change: To the extent that W. H P wants us to continue to coordinate the business at QVC, we will do that.
Speaker Change: And you mentioned the prospect of acquisitions, and maybe possibly even transformative acquisitions I was just wondering if you can just kind of give us some thoughts on those types of acquisitions that you're mostly interested in.
Speaker Change: We are interested in.
Speaker Change: Brands brands that have significant social media followings.
Speaker Change: And we've been looking at many of those.
Speaker Change: And we are looking at media companies that.
Speaker Change: And our reach.
Speaker Change: The kinds of acquisitions, we're focused on.
Speaker Change: Gotcha, Alright, Thats all I have good luck to you guys.
Speaker Change: Thank you.
Speaker Change: Again, if you would like to ask a question since you press star followed by the number one on your telephone keypad.
Speaker Change: And your next question comes from the line of Anthony <unk> with Sidoti <unk> Company. Anthony. Please go ahead.
Anthony: Good afternoon, and thank you for taking the questions. So first just a couple of housekeeping.
Anthony: Items as far as the impact of Lori Goldstein. So I think it was about $1 1 million in the fourth quarter.
Anthony: Can you go over what that was in the first quarter and can you also remind us how much that Lori Goldstein contribute to your second quarter revenue last year.
Jim Haran: Jim can you take.
Jim Haran: Hello.
Anthony: Yes.
Anthony: Is it the second quarter and first quarter from last year. So.
Anthony: Well I'm asking for the first quarter, how much that was and then if you could just remind us how much Lori.
Anthony: <unk> contributed to your.
Anthony: Second quarter revenue a year ago. So it was $1 1 million.
Anthony: Top line in the first quarter 2024.
Anthony: Second quarter was a little bit more than that I think it was $1 1 million.
Anthony: And there were.
Anthony: Significant expenses that we have against that brand.
Anthony: And with that and what they are.
Anthony: On a cash flow basis, it wasn't that significant.
Anthony: That.
Anthony: We gave up and divesting themselves of the brand.
Anthony: Alright.
Jim Haran: Thank you Jim Okay, and then.
Anthony: If I could just follow up on the question that.
Anthony: Yeah.
Anthony: Mike had before as far as.
Anthony: Looking at the number of social media followers.
Anthony: Obviously, you've seen that growth from $5 to $45 million.
Anthony: How do we think about the revenue growth associated with that and obviously you have a goal to get to 100 million followers. So how does that translate to revenue growth.
Anthony: Can you expand on that curve.
Speaker Change: Youre willing to quantify that but just curious to get your take on that Bob.
Anthony: So I think you can you can.
Anthony: Look at each of these opportunities.
Anthony: Where they have the potential to generate anywhere from $5 million to $10 million.
Anthony: Hello.
Anthony: Robert.
Anthony: I cannot hear Robert.
Speaker Change: Alright, we are having a technical difficulty everyone. Please give spending by back momentarily.
Anthony: [music].
Anthony: Okay.
Anthony: Yes.
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Anthony: Yes.
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Anthony: Thank you preparation liberating and we are back.
Anthony: Hello.
Anthony: Hello.
Anthony: Anthony are you still on.
Anthony: Okay.
Anthony: Yes Anthony.
Anthony: Anthony can you hear me yes.
Anthony: Yes, I can hear you yes.
Speaker Change: Okay. Anthony can you repeat the question. So we can we can answer again.
Anthony: Absolutely, yes so.
Anthony: As far as the number of social media followers, obviously as you pointed out in your press release and in your prepared remarks, it has grown from $5 to $45 million.
Speaker Change: And do you a goal to get to 100 million. So how do we think about the revenue growth I know you started answering the questions.
Anthony: Before we got cut off so maybe if you could just finish your thoughts that would be great.
Anthony: Yes.
Anthony: I think you can think about the potential.
Anthony: The Titans of transactions.
Anthony: Particularly when it.
Anthony: <unk> or Jim.
Anthony: These are mainly.
Anthony: And gentlemen.
Speaker Change: Jenny they have the potential to generate between five and $10 million of royalty income per year of course, it will take some time to ramp up to that.
Anthony: But thats the potential that we believe they have done.
Anthony: And we won't know.
Anthony: Exactly where they will come out until we really get into the market and.
Anthony: Selling and all of the agreements across the various different categories.
Anthony: For each of these brands, but Cesar by way of example, we're under.
Anthony: Discussions with 50 different literally 50 different companies.
Anthony: In various categories.
Anthony: To build the world, but Cesar.
Anthony: We certainly think Cesar has the top end of that.
Anthony: Range has potential.
Anthony: That's very helpful. And then so I know you guys have done a tremendous job of cutting costs and the euro at an annual run rate of about $9 million for operating expenses, so as that business pivots to growth.
Anthony: How do we think about the <unk>.
Anthony: Operating expenses, just wondering about the fixed nature versus the variable nature of your expenses.
Anthony: So I'll answer that.
Anthony: Yes.
Anthony: Alright.
Anthony: Our structure is designed to scale the only real incremental cost will go into half.
Anthony: Where we pay.
Anthony: Our co brand.
Anthony: Our partners will pay them additional commissions on revenue generated with those brands. So.
Anthony: The real cost, we're going to incur as we scale the business as it can be incremental that's going to correlate with our revenue growth.
Anthony: In terms of fixed cost with our platform and structures.
Anthony: Got it.
Anthony: We we've developed it to a point, where we can scale a business we have incurred additional costs outside of the general questions I just mentioned.
Anthony: Got you Okay, that's very helpful.
Anthony: Yes.
Anthony: As we look to update our models given that youre now more than two months into the second quarter.
Anthony: How should we think about the second quarter.
Anthony: Compared to last year or compared to the first quarter that you just reported or any sort of high level thoughts as far as revenue.
Anthony: Profitability.
Speaker Change: I think we're good with where you are Anthony and certainly if we become aware of anything that will impact the numbers.
Anthony: Well, we'll report on that.
Anthony: Okay.
Anthony: That sounds good all right. That's all I had thank you very much and best of luck.
Anthony: Thank you Anthony.
Anthony: Thank you.
Anthony: Thanks Anthony.
Anthony: There is no further question at this time I will now turn the call back over to Robert for closing remarks Robert.
Anthony: Thank you ladies and gentlemen, thank you for your time. This evening. We greatly appreciate your continued interest and support next L brands as always stay fit eat well and be healthy.
Anthony: This concludes today's conference call you may now disconnect.
Anthony: Sure.
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Anthony: Okay.
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Anthony: Yeah.
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Anthony: Okay.
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Anthony: Yeah.
Anthony: Yes.
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